Tale of one city isn't pretty

Detroit Pistons at Orlando Magic

November 6, 2009|By Josh Robbins, Sentinel Staff Writer

On Tuesday night in Auburn Hills, Mich., the Orlando Magic and Detroit Pistons played a basketball game in front of an announced crowd of 15,487. That left at least 6,589 empty seats inside an arena that until recently had hosted five consecutive years of sold-out NBA games.

On Thursday morning in downtown Orlando, about 200 guests gathered as workmen fastened the final two structural steel beams to Amway Center, the future home of the Orlando Magic.

That arena -- which opens next October -- and the team's 2009 NBA Finals appearance have helped the Magic build their ticket base and maintain sponsorship levels.

Teams like the Pistons, who face the Magic tonight at Amway Arena, haven't been so fortunate in weathering the nation's worst economic downturn since the Great Depression.

"We're beyond enthused because the future is so bright right now for this community and the Magic team and its place in the community," said Bob Vander Weide, the Magic's president and chief executive officer. "Obviously, when I'm in a boardroom up in New York with all my partners from other cities, it's hard to have a full smile because you know what some of them are going through right now."

NBA Commissioner David Stern has predicted that the recession and ticket-price discounting will erode league revenue this season. He said there was "good reason to hope" that the decline in league revenue will be under 4 percent.

A perfect storm makes the outlook grimmer for the Pistons, who anticipate a 10 percent drop in overall revenue this season.

And in addition to the economic problems, the Pistons face competition for ticket and advertising revenue from the NHL's Detroit Red Wings, Major League Baseball's Detroit Tigers, the NFL's Detroit Lions and the major college programs at Michigan and Michigan State.

Plus the Pistons are undergoing a rebuilding process after reaching the Eastern Conference finals every year from 2003 to 2008.

"In terms of cost-cutting, there's hardly anything that's escaped," said Tom Wilson, president and chief executive officer of Palace Sports and Entertainment, the umbrella group that includes the Pistons and The Palace of Auburn Hills.

That group has cut about 30 to 40 employees from their staff of 300 through attrition to reduce costs, Wilson said.

The Magic haven't laid off workers, but Chief Operating Officer Alex Martins acknowledged that employees' salary increases were not as large as in past years.

Team officials held their employees' off-season staff development workshop at a nearby Sheraton instead of on Disney or Universal property, Martins said. This year's holiday party also has been canceled.

But Magic officials are used to incurring losses year after year.

Martins has said the team has lost an average of $15 million per season over the past six years because its arena lacks revenue-generating amenities such as luxury suites.

Martins also expects a greater loss this year, because the team's payroll has grown to about $81 million. For the first time, the Magic are above the league's luxury-tax threshold and will have to pay a dollar-for-dollar penalty for its total player salary above $69.92 million.

Teams that are under the threshold, like the Pistons, receive a portion of the total tax money that the league collects.

Still, even with an increased payroll, the Magic did not raise ticket prices for this season, and 7,500 tickets each game still cost under $25.

"We wanted to be sensitive to where people's economic situations were at the time, and we also wanted to maintain our base, because it was growing," Martins said.

Magic spokesman Joel Glass said the team has sold 12,890 season tickets for this season. Martins said that number was only 5,500 four years ago.

In Detroit, the Pistons will sell about 8,000 season tickets for this year, down about 25 percent from last year, Wilson said. That decrease has occurred even though the team has discounted ticket prices.

Still, Wilson said, the team has done well in keeping sponsors.

Dan Hauser, a Pistons executive vice president, acknowledges that it's important to be creative in the current economic climate. In previous years, the team had no problem selling advertising on the stanchions for its backboards. Last year, however, the Pistons couldn't find a company that would purchase the advertising for all 41 home games; so, the Pistons sold the space to three companies that each had the space for about 14 home games apiece.

"In my career, this is probably the toughest I've ever seen it," said Hauser, who has been with the team for about 30 years. "It really is tough. But at the end of the day we still have to produce. We have to keep working. Sometimes you have to package a little differently in sponsorship than we had to years ago."

The Magic are offering creative sponsorship opportunities in their new building. AirTran has become the team's new official airline, and as a part of the agreement, one area in the inner seating bowl will be called the AirTran Airways Flight Deck. It will resemble an AirTran business-class compartment.

"Gone are the days where a company will pay you six figures to put their logo on a sign," Martins said. "Now we have to show a direct hard return."

In Detroit, Wilson thinks better days will return.

"We're fortunate, I think, to be where we are," he said. "We never took our sponsors for granted. We never took our customers for granted. And I think that has helped get us over the hump. As bad as things are, had we been more cavalier in our good days, I think it would be a lot worse. There would be payback. As it is now, people are apologizing for leaving."